AUD/USD forecast: Aussie to retest 0.68 after RBA rate hike

The AUD/USD price tilted upwards on Monday as investors refocused on the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The pair is trading at 0.6855, which is a few points above last week’s low of 0.6767. 

RBA interest rate decision 

The AUD to USD exchange rate will be in focus on Tuesday morning when the RBA delivers its monetary policy decision. 

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The decision comes at an important time for the Australian economy. Recent data revealed that the country’s economy has started unwinding as inflation surges. Consumer and business confidence have all dropped, which has affected retail spending.

At th same time, while house prices are at an elevated level, the overall trend has started waning as mortgage rates soar. A report published last week revealed that over 70 financial institutions have announced rate hikes. 

Most importantly, commodity prices has started dropping as concerns about a global recession rises. Australian coal prices have dropped as traders buy cheap products from Indonesia and Russia.

Still, analysts expect that the RBA will decide to hike interest rates for the third straight meeting. Precisely, they believe that the bank will hike rates by another 0.50% and warn that more rate hikes will be needed in the coming months. 

The bank will justify higher rate hikes with the need to control the soaring consumer inflation. Recent data showed that Australia’s inflation rose to above 5% and the RBA has warned that prices will soar to 7% later this year.

Stilll, there are signs that inflation will start dropping. Oil prices have pulled back from their highest levels this year while the Bloomberg Commodity Index has fallen by over 10% from its highest point in June.

The AUD/USD will next react to the latest non-farm payrolls (NFP) data from the United States. Analysts expect these numbers to reveal that the country’s labor market softened in June.

AUD/USD forecast

The four-hour chart shows that the AUD/USD pair has bounced back from the lowest level last week. It rose to a high of 0.688, which was the highest point since Wednesday last week. It also moved between the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in an uptrend. 

Therefore, there is a possibility that the pair will resume the bearish trend even after the RBA rate hike on Tuesday this week. If this happens, the key level to watch will be at 0.6800.